European Commission

Intel alleges that its due process rights were violated by a massive $1.45 billion fine recently imposed as a result of a one-sided antitrust investigation that excluded evidence of its innocence. It says that a biased investigation by the European Commission violated the European Convention on Human Rights. Despite its title, the Convention protects not just humans but also “non-governmental organisations” like corporations, as its text and many court rulings confirm.

I think Intel has a strong case. But some commentators have greeted Intel’s argument with scorn. They say it can’t rely on human rights because it is a corporation and not a human being. They also say that the fine can’t be challenged because it is civil, not criminal — even though the Convention protects due process in both civil and criminal proceedings, and treats massive penalties like the one imposed on Intel as criminal, not civil, because of their punitive nature.

In May, the European Commission fined Intel a record-setting $1.45 billion dollars for violating EU antitrust law for allegedly using rebates to potentially penalize clients who purchased too many computer chips from a smaller rival. “Intel is the world’s biggest computer chip maker and controls roughly 80% of the computer chip market.”

Recently, however, the Commission’s proceedings against Intel were criticized for unfairness by the EU’s own ombudsman: “The European Union’s ombudsman has issued a rare rebuke of the bloc’s antitrust regulator, saying it failed to record ‘potentially exculpatory’ evidence from a witness in its investigation of chip giant Intel Corp.”

Despite this unfairness, Intel has been criticized for even raising a due process claim, under the theory that companies don’t have “human rights.” A writer in Forbes Magazine claimed that “the chip giant is grasping for straws with its ‘human rights’ appeal against Europe’s $1.5B fine,” since the “idea of a company appealing to recognize its ‘human rights’ sounds a little odd.” Intel’s argument drew a hail of scorn among commenters in response to a blog post at Ars Technica, including the following reactions: “Please destroy corporations who claim their human rights were violated,” “I had never laughed that hard . . . .before,” and “Any corporation that claims personhood for the purpose of asserting human rights opens a very scary Pandora’s Box.”

But the text of the European Convention on Human Rights is clear that it does not apply just to humans, stating in Article 34 that “any person, non-governmental organisation or group of individuals claiming to be the victim of a violation” may seek redress. For that reason, court rulings have routinely applied the due-process protections of Article 6 of the Convention to corporations. See Michael Addo, Human Rights Standards and the Responsibility of Transnational Corporations (1999) at pp. 194-95 (discussing four such cases, including (1) Dombo Beheer v. Netherlands (1993), (2) Editions Periscope v. France (1992), (3) Union Alimentaria Sanders SA v. Spain (1989), and (4) Societe Stenuit v. France (1992)).

It is odd to see the media disparage the idea of a company having rights, given the fact that media companies constantly invoke the First Amendment and other constitutional rights, like the right to a public trial. The most important First Amendment cases in the past half century have been brought by media companies, such as New York Times v. Sullivan (1964), which overturned a damage award against a media company for libel (and in the process radically cut back the reach of American defamation law), and New York Times Co. v. United States (1971), which ruled in favor of two media companies seeking to publish the Pentagon Papers. Most constitutional rights have been held to apply to corporations (and corporations in general, not just media corporations).

Denying a corporation like Intel the ability to raise human-rights challenges would harm human beings: its shareholders, whose quarterly earnings were wiped out by the massive fine imposed on it by the European Commission, leaving them with a $398 million loss. Allowing due process violations to go unremedied is particularly dangerous in antitrust cases, since antitrust law is often vague and unpredictable and subject to differing interpretations.

And as lawyer Kimberly Curtis notes, Intel is not alone in protesting the EU’s handling of antitrust cases. “Intel and a growing number of other companies argue that the EU method of investigating antitrust violations is contrary to European human rights law since it is a political appointee who oversees the investigation and decides guilt,” in an administrative proceeding in which an appointee acts as prosecutor, judge, and jury. This “calls into question the EU’s practice of having a political appointee — the current antitrust commissioner is Neelie Kroes of the Netherlands — who supervises investigations, and then decides whether the company is guilty and what the punishment should be.”

Moreover, the exclusion of exculpatory evidence in the Intel case was strikingly similar to a human-rights violation found in a landmark case decided by the European Court of Human Rights, in Dombo Beheer B.V. v. Netherlands (1993) 18 EHRR 213. In that case, the court found that the legal system of the Netherlands had violated the due-process rights of a corporation under Article 6 of the European Convention on Human Rights through a one-sided proceeding that excluded one side’s evidence, while permitting the other’s. It also made clear that the right to a fair trial applies not just in criminal cases, but also in civil litigation: “The Court agrees” that in “litigation involving opposing private interests . . . each party must be afforded a reasonable opportunity to present his case – including his evidence – under conditions that do not place him at a substantial disadvantage vis-a-vis his opponent.”

Huge administrative fines such as Intel’s are subject to particularly exacting scrutiny under the Convention both because of their size and punitiveness, which makes them “criminal” in nature, and the fact that they were imposed in an administrative proceeding that combined “investigative and judicial functions.” That’s the lesson from the European Court of Human Rights’ June 11 decision in Dubus S.A. v. France, which found a violation of a corporation’s rights despite a much smaller penalty and seemingly less egregious facts, where an administrative agency had the power to award potentially large sanctions using procedures similar to what the European Commission uses in antitrust cases.

The court found that the “potentially” “high amounts” of the penalties the agency could impose made its proceedings criminal in nature, and that its “combination of investigative and judicial functions” — a feature shared with European Commission antitrust proceedings — subjected its proceedings to heightened human-rights scrutiny. The court ruled that the French Banking Commission violated an investment company’s rights under Article 6 of the human-rights convention by subjecting it to disciplinary proceedings that lacked “independence and impartiality”:

“The Court of Human Rights found that there was no clear distinction between the functions of prosecution, investigation and adjudication in the exercise of the judicial power vested in the French Banking Commission. While the combination of investigative and judicial functions was not, in itself, incompatible with the need for impartiality, this was subject to their being no ‘prejudgment’ on the part of the Banking Commission. The Court stated that there was a need for strict controls, to avoid giving the impression that guilt had been established from the very start of the disciplinary proceedings. The Court of Human Rights also found that Dubus could reasonably believe that it was prosecuted and tried by the same people, and consequently could entertain doubts about the impartiality of the decision of the Banking Commission, which, in its various capacities, had brought disciplinary proceedings against it, notified it of the offences and imposed the penalty. Interestingly, the Court of Human Rights also held . . . that the penalties in the form of fines were penal in character given the high amounts that could, potentially, be imposed.”

As the EU Law Blog notes, this ruling is “significant” for antitrust cases like Intel’s “because the procedure used by the European Commission in antitrust cases is rather similar (but not identical) to the one applied by the French Banking Commission.

Similarly, Kimberly Curtis notes, “the massive size of recent fines” in EU antitrust cases

“suggests that the fines are ‘deterrent and punitive’ and therefore implies that they are criminal in nature. Cases from the European Court of Human Rights in Strasbourg detail what constitutes a criminal case, and one factor is the severity of the punishment. . . billion dollar fines are quite severe. But criminal cases are overseen by an impartial tribunal and defendants are allowed to present a defense, two things guaranteed under European human rights law through the European Convention on Human Rights and two things that the current EU antitrust system lacks.”

It may well be that European courts will be reluctant to overturn what the European Commission has done to Intel, given that a ruling in its favor might call into question the Commission’s handling of other high-profile antitrust cases that have likewise led to large fines. Forbes reports that “in an interim hearing on this case, the president of the Court of First Instance” refused to grant Intel the relief it sought.

But since that hearing, the EU Ombudsman has rebuked the Commission for its unfair treatment of Intel. Indeed, Intel seems to have been treated worse than other litigants whose rights under the Convention were found to have been violated. In light of the strong evidence that Intel’s rights were violated, the European courts may have no principled alternative other than to rule in favor of Intel.